![[Basket]](images/basket.png){kind=small}
Your order![[cover image]](images/issue/BK201305.jpg)
11. REDUNDANCY
What is redundancy?
Not every situation in which employees lose their jobs through no fault of their own is covered by redundancy law and confusingly, “redundancy” has two different meanings. One is used to establish an individual’s right to a redundancy payment and to be fairly dismissed, and the other is used for the purposes of collective consultation.
The right not to be unfairly dismissed for redundancy and the right to a redundancy payment is governed by section 139 of the Employment Rights Act 1996 (ERA 96). This says an employee is dismissed for redundancy if the dismissal is wholly or mainly because:
• the employer has ceased, or intends to cease, to carry on the business for which the employee was employed, or to carry on that business in the place where the employee was employed; or
• the requirements of the business for employees to carry out work of a particular kind, or to carry it out in the place where they are employed, have ceased or diminished or are expected to cease or diminish.
If either of these conditions are met, there will be a genuine redundancy situation.
For many years, it was established law that the test for redundancy under section 139 ERA above required a reduction in headcount. In other words, it was believed that there could only be a redundancy, for the purposes of claiming unfair dismissal and a redundancy payment, if the employer needed fewer (or no) employees to do work of a particular kind or in a particular location. There could be no redundancy if the employer still needed the same number of employees to do the same tasks, even if there was less work to do. (A different test is used for the purposes of collective consultation on redundancies).
In 2012, the EAT changed the law in an important case: Packman t/a Packman Lucas Associates v Fauchon ([2012] UKEAT/0017/12/LA). This case establishes that a redundancy dismissal does not always require a reduction in headcount, whether actual or anticipated:
Ms Fauchon was a bookkeeper. A downturn in business combined with the introduction of new accounting software meant her employer needed her to work fewer hours. The business still needed the same number of employees — one bookkeeper — but to do less work. The employer had no contractual right to demand a cut in hours, and Ms Fauchon refused a request to work fewer hours, leading directly to her dismissal. Her employer refused to pay a redundancy payment. He argued that the dismissal was not a redundancy because he still needed a bookkeeper, albeit one who worked fewer hours.
The EAT decided that Ms Fouchon had indeed been made redundant. The case establishes that there can be a redundancy where:
• the employer needs fewer employees to do the same amount of work;
• the employer needs fewer employees to do a particular kind of work, or in a particular place; or
• the employer has less work, but wants to use the same number of employees to do it (sharing out fewer hours between them).
Ms Fauchon was dismissed because of redundancy because although her employer still needed a bookkeeper, he needed one who was willing to work fewer hours and it was the refusal to work fewer hours that led to her dismissal.
Packman t/a Packman Lucas Associates v Fauchon [2012] UKEAT/0017/12/LA
The Packman case is important because it approaches the test for redundancy using a full-time equivalent (FTE) approach, as opposed to simply counting heads. As such, it adopts a more realistic and less artificial approach to redundancy payments.
Even so, it is important to note that in this case, the employer had no contractual right to insist on a cut in hours. Reps should be very cautious if instead of making employees redundant, employers seek to rely on a contractual right to make changes to the contract terms. Dismissals for refusing to agree to a change to contract terms can be fair.